Don't panic! Probuild overturned, so adjudication determinations under SOP Act will stand despite non-jurisdictional errors of law

The Court of Appeal has overturned the first instance decision in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770 and reaffirmed the widely accepted position in NSW (prior to the first Probuild decision) that adjudication determinations are not amenable to review for non-jurisdictional errors of law on the face of the record.

The decision in Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379 means that it will be significantly more difficult for a dissatisfied party to successfully challenge an adjudication determination, because only jurisdictional errors of law will render a determination void.  Non-jurisdictional errors of law, no matter how significant, will not invalidate an adjudication determination. 

The practical difficulty with this distinction is that the divide between what constitutes a jurisdictional error and a non-jurisdictional error can often be uncertain.  

What was the problem affecting adjudication determinations under the SOP Act?

The primary question considered by the Court of Appeal was how section 69 of the Supreme Court Act 1970 (NSW) interacted with the Building and Construction Security of Payment Act 1999 (NSW) (SOP Act), and in particular whether the SOP Act should be understood to preclude the Supreme Court's supervisory jurisdiction (as enshrined in section 69(3) of the Supreme Court Act) to quash the ultimate determinations of a court or tribunal in any proceedings if that determination has been made on the basis of an error of law that appears on the face of the record. 

Prior to 2010, the commonly accepted position in NSW was that the SOP Act precluded judicial review except where the adjudication determination failed to comply with an "basic and essential requirement" of the SOP Act.  This was the position stated in the Court of Appeal's decision in 2004 in Brodyn Pty Ltd v Davenport.  

However, insofar as Brodyn meant that the SOP Act precluded judicial review for jurisdictional errors of law, that was overruled in 2010 by the Court of Appeal in Chase Oyster Bar v Hamo.  Since then, there has been some debate about whether the SOP Act precluded judicial review for non-jurisdictional errors of law as well.  At first instance the trial judge in Probuild concluded that adjudication determinations were amenable to judicial review for non-jurisdictional errors of law.  

The Court of Appeal affirms Brodyn and the need for jurisdictional errors of law

On appeal, the Court of Appeal reconsidered the reasoning in Brodyn and various other decisions which followed it, and ultimately affirmed the decision in Brodyn insofar as it related to non-jurisdictional errors of law.  In particular, the Court of Appeal noted: 

• that the express purpose of the SOP Act (as stated in section 3) is to ensure that any person who undertakes to carry out construction work is entitled to receive progress payments regardless of whether the contract provides for progress payments;
• the SOP Act provides a self-contained scheme for resolving disputes with respect to payment claims which the parties cannot contract out of; and
• that Brodyn has been consistently followed in a numerous cases in NSW and in other States,

all of which could be undermined if the Court were to now overturn Brodyn. 

Entitlement to receive progress payments

The Court's discussion regarding the SOP Act providing an entitlement to receive progress payments regardless of whether the contract provides for progress payments is interesting, particularly in light of the recent decision of the High Court in Lewence, which suggested that parties may agree in contract to suspend any entitlement to progress payments.